November 12, 2008

Brazilian soy trade slows after getting Nov 10 lift


Brazil's physical soy business saw a pick-up on Monday (November 10), with prices rising on the Chicago Board of Trade, but by Tuesday trade had returned to a snail's pace, brokers and analysts said.


"CBOT was up on Monday, which helped business, but on Tuesday the market fell with the stronger dollar doing little to help business in Brazil," said Steve Cachia, a soy-market analyst at brokerage firm Cerealpar.


Soy futures contracts recorded strong gains Monday on CBOT, but on Tuesday January soy contracts dropped 46 cents to US$9.02 per bushel.


The stronger US dollar against the real on Tuesday gave some support to soy prices but did little to encourage physical soy trade. One US dollar equaled 2.22 Brazilian real on Tuesday.


When the dollar is strong against the Brazilian real, this usually helps to stimulate Brazilian producers to sell because they get more for their crop in the local currency.


William Balbino, a trader at brokerage firm Cerealpar, said on Monday that US multinational ADM (ADM) purchased 1,000 tonnes of soy for 39 Brazilian reals (US$17.5) per 60-kilogram bag in Mato Grosso state, Brazil's No. 1 soy-producing state.


However, little other business has been done, with buyers such as local and international crushers having enough stocks to last until the next harvest and aren't aggressively buying, Cachia said. Brazil will start its harvest next spring.


Brazil's inter-harvest period is usually quiet. Farmers in Brazil's main soy-producing states such as Mato Grosso have already sold most of their 2007-08 old-crop beans, while in Parana, the No. 2 soy producer, farmers continue to clutch onto any remaining old soy. "They have enough capital to take the risk and speculate for higher prices," said Cachia.


Cerealpar said that on Tuesday, soy premiums at the Paranagua port, Brazil's main port for grain shipments, had buyers offering 95 cents over the December soy futures contract on CBOT, while sellers were asking for 110 cents over the same contract, with virtually no price agreement.


Glauco Monte, a soy consultant at FCStone, said China's stimulus package gave CBOT and the Brazilian soy market a short-lived lift on Monday, but by Tuesday Brazil's physical soy trade had ground to a halt.


Commodities on Monday ranging from crude oil to gold, base metals, edible oils and grains rose on news that China is planning to spend US$586 billion to rejuvenate its economy. China is the world's largest importer of soy.


Buyers are still holding back from making large purchases of beans due to the volatility of crude oil prices, equity markets and the lack of credit, Monte said.


The malaise wasn't helped by the US Department of Agriculture's latest soy crop data on Monday, which had only a "neutral" impact on the Brazilian soy market, Monte said. USDA pegged the US 2008-09 soy production at 2.921 billion bushels, down from its October estimate of 2.938 billion but slightly above the average trade estimate of 2.916 billion. Yield was seen at 39.3 bushels per acre, down from the USDA's October estimate of 39.5 bushels but above the average trade estimate of 39.2 bushels.


The export market is also slow because Brazilian soy isn't competitive in the interim harvest period, with cheaper beans available from the US, said the chief trader at a major US multinational.


The trader expects Brazil to export around 24 million tonnes of soy in 2008 and around 25 million tonnes next year.


Brazilian agricultural consultancy Celeres said on Monday that Brazil's new 2008-09 soy crop was 41 percent planted by November 7, compared to a five-year average of 37 percent and 29 percent the week before. Brazilian farmers started planting soy last month.


Brazil should harvest between 58.3 million and 59.3 million tonnes of soy in the 2008-09 crop, the National Commodities Supply Corp., or Conab, said Thursday.


Brazil is the world's second-largest producer of soy after the US.

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